Equity markets ‘set to rise strongly’

WORLD equity markets will rise strongly next year buoyed by an improving international economy, a leading investment adviser said over the weekend.

Ulster Bank head of investments Derek Moore says that international markets have already showed positive signs of sustained recovery and this will continue next year and at a quicker pace.

"There are promising signs that the global economic recovery has already started and, while Europe will continue to lag, the US is likely to recover more strongly in 2004. Equity markets should continue to strengthen, with stocks outperforming bonds, and Japanese equities in particular showing strong growth," he said.

Mr Moore told an Institute of Certified Public Accountants conference in Cork that the US and Japan are taking the most decisive steps to bring their economies out of recession and this will be reflected in the growth of their stock markets.

"In the US, the aggressive monetary policy that was set in place, in the aftermath of September 11, has begun to work its magic.

"The economy is strengthening, but the Federal Reserve is likely to adopt a cautious approach to ensure that the recovery is cemented before increasing interest rates."

He said Japan had experienced its sixth straight quarter of growth, driven by strong consumer ~confidence.

"The corporate sector, which traditionally guaranteed a job for life is now making the necessary hard decisions, uncommercial manufacturing capacity is being shut down and Japan Inc is moving offshore, outsourcing in a large way to China," added Mr Moore.

But growth in eurozone equity markets will be weaker given that three members States Italy, Germany and the Netherlands are in recession. "Inflation is expected to increase and the indications are that the ECB will hold interest rates steady in the short-term. However, I expect a rise in rates in the middle of next year.

"For investors, this means that global equity markets can be expected to strengthen in 2004, on the back of a global economic recovery led by the US."

"My view is that investors will return to the equity market as bond yields are hovering at historically low levels," added Mr Moore. "The Japanese stock market is close to its high for the year and I expect that Japanese equities are likely to be the star performers in 2004."